Budgeting for home improvements and repairs

When you purchase a home, it’s important to consider the expenses that come along with homeownership. Some of the largest ongoing expenses are improvement and repairs.

Most homeowners need to spend 1% to 2% of the purchase price of their home every year for routine maintenance projects, such as window replacement and roofing repair. Upgrading your home with a full-fledged remodel costs even more. To determine the financial implications of the project you have in mind, follow these simple steps before you get started:

Define the project.
Take a look at your home, outline the repair projects you’d like to accomplish, and arrange them in order, from the most important to the least important. It’s crucial that you prioritize these tasks, as your budget might limit the amount of repairs you can accomplish.

Set your budget.
Take into account the costs of labor, tools and equipment, materials, permits, and cleanup when trying to determine what your project will cost. Once you have a target amount in mind, you should figure out where your funding will come from. Assess how much you can contribute to the project and how much you’ll need to borrow. If you do decide to borrow or refinance, you should determine how much your loan will cost each month, and factor that amount into your
monthly budget
.

Select a contractor.
If you don’t know a reliable contractor, it may be wise to get recommendations from your friends and neighbors, and check the Better Business Bureau. Ask potential contractors to outline their experience doing the type of work you have in mind, and be sure they have all relevant licenses. While it may be tempting to choose the contractor that offers the lowest price, try to balance the contractor’s ability to provide long-term quality against the price they quote.

Determine the value.
Is it worth it to you? Some home improvements, such as adding new exterior siding, landscaping your front yard, or adding an extra living space, may increase your property’s value over time. However, your ability to recover your home repair expenses is determined by numerous factors, such as how long you plan to remain in your home and the type of improvements you make. So, be sure to weigh the long-term value of each project before you decide to proceed and don’t assume that you’ll make all or most of your money back in a later sale.

By prioritizing your needs and assessing the value of your projects, you can make informed choices that may help improve your home, as well as your financial picture.

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Your ability to recover your home repair expenses is affected by how long you plan to remain in the home and the type of improvements you make.”

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